4 Things Debt Collectors Won't Tell You

Of all the industries the Federal Trade Commission receives complaints about, debt collectors are involved in the most, accounting for around 27% of all complaints received in 2010. A big part of the problem is misinformation about the rules regarding what debt collectors can legally say and how nuch authority they actually have.

Thus, the folks at SmartMoney.com put together a list of things that most debt collectors won’t tell you about their business.

Here are some of the highlights:

1. “You can stop our calls”
“Under federal law, repeated calls, obscene language, threats of arrest and threats of violence are all illegal,” writes SmartMoney. “Consumers need only to send a collector a written letter asking the collector to stop contacting them, and the collector must comply.”

Once the collector gets the letter, it can only contact you to let you know that it won’t be making any further contact or to declare that some further action — like a lawsuit — is in the offing. If the collector ignores the letter, you may be able to sue.

2. “You may not really owe the debt.”
“Some debt collectors buy up old debts for pennies on the dollar, planning to collect enough to make a profit…. Often, however, those lists have sketchy information that may be full of errors or include debts that already have been paid or dismissed,” explains SmartMoney.

Beyond that, the statute of limitations may have expired on some of the debts on that list, though don’t expect the collectors to check that before they begin calling you at all hours of the day and night.

Though you may no longer legally owe a debt that’s beyond the statute of limitations, there’s nothing to stop collectors from trying to get the money — so long as they don’t threaten legal action. (FYI, there is no statute of limitations on student loans.)

3. “We have less power than you might think.”
Though some unscrupulous collectors have been known to threaten arrest, not only can’t they have you jailed for an unpaid debt, collectors are forbidden from even saying they can have you arrested.

More limits, according to SmartMoney:

They’re not supposed to reveal any details about your debt to your friends, family or neighbors, for example. They can call your employer to verify where you work, but if they’re told that you’re not allowed to receive calls at work, they must stop calling you there. And they’re not allowed to call before 8 a.m. or after 9 p.m. unless you specifically agree to allow it.

4. “You’re better off fighting than settling.”
Though persistent lawyers and impatient judges may urge a settlement, but such settlements can put you in a worse position than you were before.

According to SmartMoney, many settlements include a catch that allows the collector to seek a judgement for the full amount of the debt — plus interest and court costs — if you fail to keep up the payment plan. One study found that those who defaulted on their settlements ended up owing an average of 24% more than they did originally.

So if you feel sure that you no longer owe the debt or that part of the debt is mistaken, it may be in your best interest to stick to your guns and demand proof from the collectors.